Customer Satisfaction Update Baker Hughes Rating Trend AVG STABLE LOW STABLE LOW STABLE LOW STABLE AVG STABLE AVG STABLE AVG STABLE AVG STABLE Rating Trend Land Wells AVG STABLE Shelf Wells AVG STABLE Deepwater Wells AVG UP Hor / Dir Wells AVG STABLE HPHT Wells AVG STABLE Harsh Environments AVG STABLE U.S. & Canada AVG STABLE International LOW STABLE * All ratings based on trailing 24-mo average. To the extent Baker Hughes seeks more firm footing on what has proven a slippery slope, it would likely do well to re-emphasize what it does best in the eyes of customers. The company unquestionably has a long- held reputation for quality downhole tools and equipment. Not surprisingly, our survey results show its greatest competitive advantages still lie in products such as drill bits, packers and downhole motors. Likewise, its strong ratings in perforating and fishing services stem, at least in part, from the quality of in-house products used in providing the services. In our opinion, a renewed emphasis on downhole products could prove a smart way to refocus the organization, while still allowing for participation in the industry's secular growth trends. Strengths to Leverage December 27, 2012 WELL TYPES & REGIONS ATTRIBUTES Transitions are hard, especially big ones. They're even more challenging when they involve moving away from something that has, by most accounts, known success. Such is the story with Baker Hughes. It's been over three years since the company embarked on its high-profile effort to transform from a relatively decentralized provider of oilfield products and services to one determined to compete via an expanded and deeper global footprint and more integrated suite of products and services. To date, the promise of this strategy has yet to fully materialize. We were skeptical it was the right decision to move away from Baker Hughes as it existed, if only because the company possessed customer satisfaction ratings in EnergyPoint's independent surveys that were very competitive with those of the major peers it was apparently targeting with the new strategy -- namely Schlumberger and Halliburton, and to a less extent Weatherford International. Since the strategy was announced in 2009, the company's overall customer satisfaction has fallen 8.9% on an adjusted basis. This compares to an average decline of 2.5% for its major peers. Nonetheless, the company still posts Average ratings in the majority of the attributes and categories we track, although job quality, post-sale support, and pricing and contract terms all currently rate as Low . We note its Low rating in international markets as well. The steady multi-year drift lower in customer satisfaction has shown signs of bottoming as of late, with the trend for most categories now flashing Stable. Struggling to Define Itself Reliability TOTAL SATISFACTION A Work in Progress Pricing & Contract Terms ENERGYPOINT RESEARCH Job Quality SATISFACTION RATINGS Post Sale Support One headwind for the company has been the reaction to the change in its culture over the last several years. Many customers and employees bemoan the loss of performance at the individual level. Not too many years ago, The 7 Habits of Highly Effective People was almost a required read for rising managers at the company. Today, it's more about matrix organizations, market-share growth and pricing strategy. Claims of too much analysis and too little execution also linger. A plethora of competing initiatives, along with inconsistent implementation, haven't helped matters. New and old employees alike seem confused as to the company's priorities. Strategic miscalculations are also apparent. Emphasis on market share led to a push into new international markets without clear signals from customers, at least that we could see, of the impending reward for doing so. The company also reorganized around geographic markets, away from a product- and service-line orientation. These steps likely encouraged greater bundling and packaging of offerings, an approach studies by EnergyPoint and others suggest often leads to diminished customer experiences. Tech & Engineering Service & Personnel Safety & Environmental 80 85 90 95 100 105 110 Downhole Motors Fishing Services Completion Packers Perforating Drill Bits Opportunity In Downhole Tools & Equipment... Customer Satisfaction Ratings as % of L-T Avg EPR Cust Sat Index EPR Cust Sat Index 92 94 96 98 100 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1 -12 Q2 -12 Customers See Baker Hughes As Heading in the Wrong Direction Total Satisfaction Ratings as % of Industry-wide L-T Avg Baker Hughes Peer Average (HAL, SLB & WFT) 80 85 90 95 100 Oilfield Services Oilfield Products Q2 2012 Q2 2010 ... But Services Represent A Drag Baker Hughes Customer Satisfaction Ratings as % of Industry-wide L-T Avg EPR Cust Sat Index Baker Hughes Peer Average (HAL, SLB & WFT) V. 1.1 Copyright 2012 EnergyPoint Research, Inc.
Transcript
Customer Satisfaction Update
Baker Hughes
Rating Trend
AVG STABLE
LOW STABLE
LOW STABLE
LOW STABLE
AVG STABLE
AVG STABLE
AVG STABLE
AVG STABLE
Rating Trend
Land Wells AVG STABLE
Shelf Wells AVG STABLE
Deepwater Wells AVG UP
Hor / Dir Wells AVG STABLE
HPHT Wells AVG STABLE
Harsh Environments AVG STABLE
U.S. & Canada AVG STABLE
International LOW STABLE
* All ratings based on trailing 24-mo average.
To the extent Baker Hughes seeks more firm footing
on what has proven a slippery slope, it would likely do
well to re-emphasize what it does best in the eyes of
customers. The company unquestionably has a long-
held reputation for quality downhole tools and
equipment. Not surprisingly, our survey results show
its greatest competitive advantages still lie in
products such as drill bits, packers and downhole
motors. Likewise, its strong ratings in perforating and
fishing services stem, at least in part, from the quality
of in-house products used in providing the services. In
our opinion, a renewed emphasis on downhole
products could prove a smart way to refocus the
organization, while still allowing for participation in
the industry's secular growth trends.
Strengths to Leverage
December 27, 2012
WELL TYPES & REGIONS
ATTRIBUTES
Transitions are hard, especially big ones. They're even more challenging when they involve moving away from
something that has, by most accounts, known success. Such is the story with Baker Hughes. It's been over three
years since the company embarked on its high-profile effort to transform from a relatively decentralized
provider of oilfield products and services to one determined to compete via an expanded and deeper global
footprint and more integrated suite of products and services. To date, the promise of this strategy has yet to
fully materialize. We were skeptical it was the right decision to move away from Baker Hughes as it existed, if
only because the company possessed customer satisfaction ratings in EnergyPoint's independent surveys that
were very competitive with those of the major peers it was apparently targeting with the new strategy --
namely Schlumberger and Halliburton, and to a less extent Weatherford International. Since the strategy was
announced in 2009, the company's overall customer satisfaction has fallen 8.9% on an adjusted basis. This
compares to an average decline of 2.5% for its major peers. Nonetheless, the company still posts Average
ratings in the majority of the attributes and categories we track, although job quality, post-sale support, and
pricing and contract terms all currently rate as Low . We note its Low rating in international markets as well. The
steady multi-year drift lower in customer satisfaction has shown signs of bottoming as of late, with the trend for
most categories now flashing Stable.
Struggling to Define Itself
Reliability
TOTAL SATISFACTION
A Work in Progress
Pricing & Contract Terms
ENERGYPOINT
RESEARCH
Job Quality
SATISFACTION
RATINGS
Post Sale Support
One headwind for the company has been the reaction
to the change in its culture over the last several years.
Many customers and employees bemoan the loss of
performance at the individual level. Not too many
years ago, The 7 Habits of Highly Effective People was
almost a required read for rising managers at the
company. Today, it's more about matrix
organizations, market-share growth and pricing
strategy. Claims of too much analysis and too little
execution also linger. A plethora of competing
initiatives, along with inconsistent implementation,
haven't helped matters. New and old employees alike
seem confused as to the company's priorities.
Strategic miscalculations are also apparent. Emphasis
on market share led to a push into new international
markets without clear signals from customers, at least
that we could see, of the impending reward for doing
so. The company also reorganized around geographic
markets, away from a product- and service-line
orientation. These steps likely encouraged greater
bundling and packaging of offerings, an approach
studies by EnergyPoint and others suggest often leads
to diminished customer experiences.
Tech & Engineering
Service & Personnel
Safety & Environmental
80 85 90 95 100 105 110
Downhole Motors
Fishing Services
Completion Packers
Perforating
Drill Bits
Opportunity In Downhole Tools & Equipment...
Customer Satisfaction Ratings as % of L-T Avg
EPR Cust Sat Index
EPR Cust Sat Index
92
94
96
98
100
Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1 -12 Q2 -12
Customers See Baker Hughes As Heading in the Wrong Direction
Total Satisfaction Ratings as % of Industry-wide L-T Avg
Baker Hughes Peer Average (HAL, SLB & WFT)
80 85 90 95 100
Oilfield Services
Oilfield Products
Q2 2012 Q2 2010
... But Services Represent A Drag Baker Hughes Customer Satisfaction Ratings
as % of Industry-wide L-T Avg
EPR Cust Sat Index
Baker Hughes Peer Average (HAL, SLB & WFT)
V. 1.1
Copyright 2012 EnergyPoint Research, Inc.
GUIDE TO ENERGYPOINT RESEARCH’S
CUSTOMER SATISFACTION RATINGS, GRADES & TRENDS
Customer satisfaction ratings are one of several tools parties can use when evaluating the quality and performance of a company or industry. EnergyPoint Research’s customer satisfaction ratings are opinions about how upstream oil and gas industry customers view the various oilfield suppliers they utilize and depend upon. Unlike other types of opinions, such as those provided by doctors or lawyers, EnergyPoint customer satisfaction ratings are not intended to be a prognosis or recommendation. Instead, they are intended to provide information about the perceived performance and quality of suppliers within the market place, including their trends over time. All satisfaction ratings collected in EnergyPoint’s surveys, unless otherwise noted, are derived from 1-to-10 pt ratings
scales, with 1 indicating a respondent is “Very Dissatisfied” with a supplier and/or its products or services, and 10 indicating they are “Very Satisfied.” For purposes of the firm’s Contract Drillers Quarterly, Oilfield Services Quarterly and Oilfield Products Quarterly publications, EnergyPoint’s opinions regarding suppliers’ customer satisfaction levels are converted to grades ranging from “VERY HIGH” to “VERY LOW.” Unless otherwise noted, all such grades are based on survey results collected within the prior 24 months, a period the firm believes captures customers’ most relevant perspectives toward a supplier. The trends in companies’ satisfaction ratings shown in these same quarterly reports, which are based on the change in ratings observed within the last 12 months, are categorized as either “UP”, “STABLE” or “DOWN”. The section below explains how suppliers’ ratings in EnergyPoint surveys are converted to the grades and trends shown in EnergyPoint’s Customer Satisfaction Quarterly updates:
CONVERSION OF CUSTOMER
SATISFACTION RATINGS TO GRADES
CONVERSION OF CHANGE IN
SATISFACTION RATINGS TO TRENDS
Rating Based on
1-to-10 Point Scale Grade Based on
1-to-10 Point Rating Change in Rating
Over Last 12 Mo’s Trend Based on
Change in Rating
Greater than 8.25 “VERY HIGH” Increase of
0.25 pts or more “UP”
Less than 8.25 and
“HIGH”
Greater than 7.75 Increase or decrease of less
than 0.25 “STEADY”
Less than 7.75 and “AVERAGE”
Greater than 6.75 Decease of
0.25 pts or more “DOWN”
Less than 6.75 and
“LOW”
Greater than 6.25 Less than 6.25 “VERY LOW”
Below is a list of the contract drillers and oilfield suppliers for which EnergyPoint collects and publishes customer satisfaction ratings as of January 1, 2012 (companies in bold are those covered in the firm’s Quarterly updates):
Aker Solutions Gardner Denver Patterson-UTI
Atwood Oceanics GE Oil & Gas Precision Drilling
Baker Hughes Halliburton Rowan Drilling
Basic Energy Services Helmerich & Payne Schlumberger
Cameron International KCA DEUTAG Scientific Drilling
Diamond Offshore National Oilwell Varco U.S. Steel
Dril-Quip Newpark Resources Unit Drilling
ENSCO Noble Drilling V&M Tubes
Expro Oceaneering International Weatherford International
FMC Technologies Oil States International Wilson Supply
Forum Energy Technologies Omron IDM
Frank's Pason Systems
ABOUT ENERGYPOINT RESEARCH
EnergyPoint Research provides independent research regarding the oil and gas industry’s satisfaction with the products and services it purchases and uti-lizes. The firm offers industry professionals and their employers opportunities to provide comprehensive and confidential feedback to suppliers through objective and independent evaluation processes. In return for participating in surveys, respondents and their employers receive complimentary survey resultsin the form of EnergyPoint’s MarketPartners®
Reports and Updates. Through the MarketPartners® Program, EnergyPoint regularly surveys significant cross-
sections of experienced industry participants involved in the selection and utilization of oilfield products and service providers. Survey participants rangefrom managers at some of the world’s largest energy companies to field personnel at independents and regionals. To learn more about EnergyPointResearch and our benchmark surveys, go to www.energypointresearch.com or call the company in Houston, Texas at +1.713.529.9450.
DISCLAIMER
The information, data, commentary and analysis included in this report were collected, compiled and published by Energy Point Research, Inc.
(“EnergyPoint”) with the intent of providing readers with relevant, although not necessarily fully definitive, information as to customers’ satisfaction with
providers of certain products and/or services. EnergyPoint does not maintain or represent that the resulting information, opinions, and conclusions pre-
sented in this or any other EnergyPoint report necessarily reflect the perspectives of all customers and /or the complete market for the products and/or
services covered in such reports. Readers are advised that surveys of the type upon which EnergyPoint’s reports are based (and the resulting data, com-
mentary and analysis) are inherently impacted by certain factors including, but not limited to, sampling error, timing of data collections, respondents’own
product/service weightings, geographic distributionof customer bases, language barriers, access to the World-Wide Web and other facilitating mediums,
ongoing competitive and market dynamics, etc. Furthermore, EnergyPoint does not maintain or represent that its surveys or reports include all companies or
par- tiesthat could be viewed as providers of the products and/or services covered in such reports. Readers are advised that other surveys and calculations
could produce materially different results, ratings, ratings systems and conclusions than those presented or referenced in this report.
Inclusion in or exclusion from any EnergyPoint report or survey should not be construed as reflecting a company’s market share or prominence in any category
of products or services.
ENERGYPOINT (I) MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS, WARRANTIES OR COVENANTS AS TO THE ACCURACY AND/OR COM-
PLETENESS OF THE INFORMATION, DATA, OPINIONS, COMMENTARY, ANALYSIS AND/OR ANY DIRECT OR INDIRECT RECOMMENDATIONS
INCLUDED IN ITS SURVEYS OR REPORTS, AND (II) DISCLAIMS ANY AND ALL DAMAGES,COSTS, AND LIABILITIES WHATSOEVER TO THE RECIPIENT OR
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